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EXHIBIT 10.19
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS SUBSCRIPTION
AGREEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER
TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL.
THE SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM
REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND UNDER PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL THAT SUCH TRANSACTION DOES NOT
REQUIRE REGISTRATION OF THE SECURITIES, WHICH OPINION AND WHICH COUNSEL SHALL BE
SATISFACTORY TO THE COMPANY IN ITS SOLE DISCRETION.
5% CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
HOMECOM COMMUNICATIONS, INC.
THIS AGREEMENT is made this 19th day of September, 1997,
between HOMECOM COMMUNICATIONS, INC., NASDAQ Symbol "HCOM" (the "Company"), a
Delaware corporation, with its principal office at Xxxxxxxx 00, Xxxxx 000, 0000
Xxxxxxxx Xxxx, Xxxxxxx, XX 00000 and __________________________ (the
"Purchaser"), with its principle office at ____________________________________.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and the Purchaser agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement:
"Agreement" means this 5% Convertible Debenture Purchase
Agreement including all Exhibits hereto.
"Closing Date" means the date of the delivery of the original
Debentures to the Escrow Agent against a wire transfer of the funds to the
Escrow Agent.
"Closing" means the completion of the purchase and sale of the
Debentures on the Closing Date.
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"Common Stock" means the Common Stock of the Company $.0001
par value.
"Conversion Date" means the date on which the Purchaser has
telecopied the Notice of Conversion to the Company.
"Conversion Price" means an amount equal to the lessor of (a)
a twenty-five (25%) percent discount from the closing bid price of the Common
Stock as reported by NASDAQ or on other securities exchanges or markets on which
the Common Stock is listed for the previous three (3) trading days ending on the
day before the Conversion Date, or (b) $6.00.
"Conversion Shares" means the Underlying Common Stock issued
upon the conversion of the Convertible Debenture.
"Conversion Table" means the Purchaser may convert up to
one-third (1/3rd) of its initial investment, including any and all interest and
liquidated damages, if any, from ninety (90) days after the Closing Date, or
upon the Registration Effective Date (whichever is sooner) and may convert up to
an additional one-third (1/3rd), including any and all interest and liquidated
damages, if any, from one hundred twenty (120) days from the Closing Date or
thirty (30) days from the Effective Registration Date (whichever is sooner), and
may convert the remaining portion of its initial investment, including any and
all interest and liquidated damages, if any, after one hundred fifty (150) days
from the Closing Date or sixty (60) days from the Registration Effective Date
(whichever is sooner).
"Convertible Debenture" means the Debenture of the Company
convertible into common stock of the Company as hereinafter provided.
"Debenture" or "Debentures" means the Convertible Debenture or
Convertible Debentures purchased on the Closing Date, as appropriate.
"Potential Material Event" means any of the following: (a) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (b) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
"Registration Effective Date" means the date upon which the
registration of the Conversion Shares is declared effective by the Commission.
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Section 2. Authorization and Sale of Debenture.
2.1 Agreement to Execute and Deliver the Debenture Agreement
and the Debenture. The Company will borrow One Million, Seven Hundred Thousand
($1,700,000) Dollars from the Purchaser in reliance upon the representations and
warranties of the Purchaser contained in this Agreement. The Purchaser will lend
such sum to the Company, in reliance upon the representations and warranties of
the Company contained in this Agreement. Such loan shall occur on the Closing
Date and shall accrue interest from the Closing Date.
2.2 Authorization. Subject to the terms and conditions of this
Agreement, the Company has authorized the execution and delivery of one or more
Convertible Debentures in an aggregate principal amount of up to One Million,
Seven Hundred Thousand ($1,700,000) Dollars (the "Principal"), with a maturity
date three (3) years after the date of issuance (the "Maturity Date"). The
Company promises to pay to the Purchaser the Principal, if any remains
unconverted, with interest at five (5%) percent per annum, in cash or shares of
Common Stock at the Conversion Price at the discretion of the Company on the
Maturity Date. Such loan shall occur on the Closing Date and shall accrue
interest from the Closing Date. The form of such Debenture is annexed hereto as
Exhibit A.
2.3 Time and Place of Closings. The Closings shall be held at
the offices of Xxxxxxx X. Xxxxxxxxx, P.C. ("Escrow Agent"), 00 Xxxxxxxx, 00xx
Xx., Xxx Xxxx, XX 00000, on the Closing Date.
2.4 Payment and Delivery. At or prior to the Closing, the
following shall occur:
(a) Purchaser shall remit by wire transfer the Purchase
Price to Escrow Agent as per the separate Escrow Agreement in the form of
Exhibit B attached hereto, which shall be executed and delivered by the parties
contemporaneously with this Agreement, as payment in full for the Debenture.
(b) Company shall deliver or cause to be delivered to
Escrow Agent original Debentures, substantially in the form set forth in Exhibit
A hereto, bearing the original signatures of an authorized officer of the
Company.
(c) Wire instructions for Xxxxxxx X. Xxxxxxxxx, P.C., as
follows:
Chase Manhattan Bank, N.A.
ABA #000000000
For the Account of
United States Trust Company of New York
Account #000-0-000000
In Favor of
Xxxxxxx X. Xxxxxxxxx, P.C. Attorney Trust Account
Account #59-02347
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2.5 Closings. At the closings, the following shall occur:
(a) The Escrow Agent shall deliver the Purchase Price and
the Debenture in accordance with the terms of the Escrow Agreement.
(b) The Company shall cause the legal opinion required
pursuant to the terms of Section 3.17 hereof to be executed and delivered to the
Purchaser.
(c) The Company and Purchaser shall execute and deliver
the Registration Rights Agreement in the form of Exhibit C attached hereto.
Section 3. General Representations and Warranties of the
Company. The Company hereby represents and warrants to, and covenants with, the
Purchaser that the following are true and correct as of the date hereof.
3.1 Organization; Qualification. The Company is a corporation
duly organized and validly existing under the laws of Delaware and is in good
standing under such laws. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets, and to carry on
its business as presently conducted. The Company is qualified to do business as
a foreign corporation in each jurisdiction in which the ownership of its
property or the nature of its business requires such qualification, except where
failure to so qualify would not have a material adverse effect on the Company.
3.2 Capitalization and Conversion. The authorized capital
stock of the Company consists of 15,000,000 Shares of Common Stock, $.0001 par
value, of which 2,956,396 are outstanding. All issued and outstanding Shares of
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable. As of the Closing Date, the Company had reserved from its
authorized but unissued shares of Common Stock a sufficient number of shares of
Common Stock for issuance upon conversion of the aggregate principal amount of
the Debenture. Each such conversion shall reduce the principal amount owing on
the Debenture by the amount stated in the Notice of Conversion (Exhibit D) and
will be reflected in a Convertible Debenture Principal Reduction Schedule signed
by an authorized officer of the Company.
The Purchaser shall be entitled to convert its Debentures into
Common Stock as per Conversion Table defined herein.
3.3 Authorization. The Company has all requisite corporate
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of the Company, its directors and shareholders necessary for the
authorization, execution, delivery and performance of this Agreement and the
Debenture by the Company, the authorization, sale, issuance and delivery of the
Conversion Shares and the performance of the Company's obligations hereunder has
been taken. This Agreement has been duly executed and delivered by the Company
and constitutes a
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legal, valid and binding obligation of the Company enforceable in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and to limitations
of public policy as they may apply to the indemnification provisions set forth
in Section 7.3 of this Agreement. Upon their issuance and delivery pursuant to
this Agreement, the Conversion Shares will be validly issued, fully paid and
nonassessable and will be free of any liens or encumbrances except for those
imposed by or on behalf of the Purchaser, its creditors or agents.
3.4 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Certificate of Incorporation, and any amendments thereto,
Bylaws and any amendments thereto of the Company or any material mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree statute, law, ordinance, rule or
regulation applicable to the Company, its properties or assets.
3.5 Accuracy of Reports and Information. The Company is in
compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12 (g) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company has registered its Common Stock
pursuant to Section 12 of the Exchange Act and the Common Stock is listed and
trades on the NASDAQ National Small Cap Market.
The Company has filed all material required to be filed
pursuant to all reporting obligations, under either Section 13(a) or 15(d) of
the Exchange Act for a period of at least twelve (12) months immediately
preceding the offer and sale of the Debenture (or for such shorter period that
the Company has been required to file such material).
3.6 SEC Filings/Full Disclosure. For a period of at least
twelve (12) months immediately preceding this offer and sale, or such shorter
period that the Company has been required to file such Reports as defined
herein, (i) none of the Company's filings with the Securities and Exchange
Commission contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading, and (ii) the Company has timely filed all requisite forms, reports
and exhibits thereto with the Securities and Exchange Commission.
There is no fact known to the Company (other than general
economic conditions known to the public generally) that has not been publicly
disclosed by the Company or disclosed in writing to the Purchaser which (i)
could reasonably be expected to have a material adverse effect on the condition
(financial or otherwise) or on earnings, business affairs, properties or assets
of the Company, or (ii) could reasonably be expected to materially and adversely
affect the ability of the Company to perform its obligations pursuant to this
Agreement.
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A copy of press release proposed to be released by the Company
on or about September 22, 1997 is attached hereto as Schedule 3.6.
The Purchaser agrees that, until such time as the press
release is generally released to the public, the information contained therein
represents confidential information, the Purchaser agrees to treat such
information as confidential, and not to disclose or use such information. In
connection therewith, the Purchaser agrees that the Purchaser will not trade in
the Company's common Stock at any time until such information is generally
released to the public.
3.7 Absence of Undisclosed Liabilities. The Company has no
material liabilities or obligations, absolute or contingent (individually or in
the aggregate), except as set forth in the Reports (as hereinafter defined) or
as incurred in the ordinary course of business after the date of the Reports.
3.8 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Debenture, or the consummation of any other transaction contemplated hereby,
except the filing with the SEC of a registration statement for the purpose of
registering the Common Stock underlying the Debenture and "Blue Sky" filings
and/or registrations required in connection with the purchase and sale of the
Debentures or the issuance of the Common Stock upon conversion thereof.
3.9 Intellectual Property Rights. Except as disclosed in the
Form 10-Ks, Form 10-Qs and Form 8-Ks filed by the Company for a period of at
least twelve (12) months immediately preceding this offer, or such shorter
period that the Company has been required to file such Reports as defined herein
(the "Reports"), the Company has sufficient trademarks, trade names, patent
rights, copyrights and licenses to conduct its business as presently conducted.
To the Company's knowledge, neither the Company nor its products is infringing
or will infringe any trademark, trade name, patent right, copyright, license,
trade secret or other similar right of others currently in existence; and there
is no claim being made against the Company regarding any trademark, trade name,
patent, copyright, license, trade secret or other intellectual property right
which could have a material adverse effect on the condition (financial or
otherwise), business, results of operations or prospects of the Company.
3.10 Material Contracts. Except as set forth in the Reports,
the material agreements to which the Company is a party described in the Reports
are valid agreements, in full force and effect, the Company is not in material
breach or material default (with or without notice or lapse of time, or both)
under any of such agreements, and, to the Company's knowledge, the other
contracting party or parties thereto are not in material breach or material
default (with or without notice or lapse of time, or both) under any of such
agreements.
3.11 Litigation. Except as disclosed in the Reports, there is
no action, proceeding or investigation pending, or to the Company's knowledge
threatened, against the
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Company which might result, either individually or in the aggregate, in any
material adverse change in the business, prospects, conditions, affairs or
operations of the Company. The Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or which the Company currently
intends to initiate which will materially effect the Company.
3.12 Title to Assets. Except as is required to be set forth in
the Reports, the Company has good and marketable title to all properties and
material assets described in the Reports as owned by it, free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest other
than such as are not material to the business of the Company.
3.13 Subsidiaries. Except as disclosed in the Reports and the
financial statements, the Company does not presently own or control, directly or
indirectly, any interest in any other corporation, partnership, association or
other business entity.
3.14 Required Governmental Permits. The Company is in
possession of and operating in material compliance with all authorizations,
licenses, certificates, consents, orders and permits from state, federal and
other regulatory authorities which are material to the conduct of its business,
all of which are valid and in full force and effect.
3.15 Listing. The Company will exercise its best efforts to
maintain the listing of its Common Stock on the Nasdaq National Small Cap Market
or other organized United States Markets or Quotron System. The Company has not
received any notice, oral or written, regarding any intention by Nasdaq to
delist the Common Stock.
3.16 Other Outstanding Securities. Except as disclosed in the
Reports, there are no other material outstanding debt or equity securities
presently convertible into Common Stock.
3.17 Legal Opinion. Purchaser shall, upon the purchase of the
Debenture, receive an opinion letter from counsel to the Company, and the
Company represents that it will immediately obtain such an opinion from counsel
to the Company in the form attached as Exhibit E.
3.18 Dilution. The Company is aware and acknowledges that
conversion of the Debentures could cause dilution to existing shareholders and
could significantly increase the outstanding number of shares of Common Stock.
3.19 Financing Restrictions. The Company cannot without the
prior written approval from the Purchaser, obtain any debt or equity financing
which would be convertible into the Company's Common Stock within the later of
one hundred fifty (150) days from the Closing Date or thirty (30) days from the
Registration Effective Date.
3.20 No Undisclosed Liabilities or Events. The Company has no
liabilities or obligations other than those disclosed in the Reports, this
Agreement or those incurred in the
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ordinary course of the Company's business since January 1, 1997, and which
individually or in the aggregate, do not or would not have a material adverse
effect on the properties, business, condition (financial or otherwise), results
of operations or prospects of the Company. No event or circumstances has
occurred or exists with respect to the Company or its properties, business,
condition (financial or otherwise), results of operations or prospects, which,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed.
3.21 No Default. The Company is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it is or its property
is bound, and neither the execution, nor the delivery by the Company, nor the
performance by the Company of its obligations under this Agreement or the
Transaction Documents, including the conversion provision of the Debentures,
will conflict with or result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the creation or imposition
of any lien or charge on any assets or properties of the Company under, any
material indenture, mortgage, deed of trust or other material agreement
applicable to the Company or instrument to which the Company is a party or by
which it is bound or any statute or the Memorandum or Articles of the Company,
or any decree, judgment, order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or its properties, or the
Company's listing agreement for its Common Stock.
3.22 Absence of Events of Default. Except as set forth in the
Reports and this Agreement, no Event of Default, as defined in the respective
agreement to which the Company is a party, and no event which, with the giving
of notice or the passage of time or both, would become an Event of Default (as
so defined), has occurred and is continuing, which would have a material adverse
effect on the Company's business, properties, prospects, condition (financial or
otherwise) or results of operations.
Section 4. Representations, Warranties and Covenants of the
Purchaser. The Purchaser represents and warrants to, and covenants with, the
Company that the following are true and correct as of the date hereof and as of
the Closing Date.
4.1 Authority. The Purchaser has all requisite right, power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Purchaser, its directors, shareholders, members or partners necessary for the
authorization, execution, delivery and performance of this Agreement, and the
purchase of the Debentures as well as their respective conversion and exercise,
and the performance of the Purchaser's obligations hereunder, has been taken.
The Purchaser's signatory has all right, power, authority and capacity to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Purchaser and will constitute the legal, valid and binding obligations of the
Purchaser, enforceable in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific
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performance, injunctive relief or other equitable remedies, and to limitations
of public policy as they may apply to the indemnification provisions set forth
in Section 7.3 of this Agreement.
4.2 Investment Experience. Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Purchaser is aware
of the Company's business affairs and financial condition and has had access to
and has acquired sufficient information about the Company, including the
Reports, to reach an informed and knowledgeable decision to acquire the
Debentures. Purchaser has such business and financial experience as is required
to give it the capacity to protect its own interests in connection with the
purchase of the Debentures.
4.3 Investment Intent. Without limiting its ability to resell
the underlying Common Stock pursuant to an effective registration statement,
Purchaser represents that it is purchasing the Debentures for its own account as
principal for investment purposes, and not with a view to a distribution.
Purchaser understands that its acquisition of the Debentures have not been
registered under the Securities Act or registered or qualified under any state
securities law in reliance on specific exemptions therefrom, which exemptions
may depend upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein. Purchaser will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchaser or otherwise acquire or take a pledge of) any of
the Debentures or the underlying Common Stock, except in compliance with the
Securities Act and any applicable state securities laws, and the rules and
regulations promulgated thereunder.
4.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Debentures or the Conversion Shares may
not be resold or otherwise transferred except in a transaction registered under
the Securities Act and any applicable state securities laws or unless an
exemption from such registration is available. Purchaser understands that the
Debentures and, if converted or exercised as the case may be, the Conversion
Shares will be imprinted with a legend that prohibits the transfer of such
securities unless (i) it is registered or such registration is not required
pursuant to an exemption therefrom, and (ii) if the transfer is pursuant to an
exemption from registration other than Rule 144 under the Securities Act and
Purchaser provides an opinion of counsel to the Company, which opinion and which
counsel shall be reasonably satisfactory to the Company to the effect that the
transaction is so exempt.
4.5 No Legal, Tax or Investment Advice. Purchaser understands
that nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the Debentures constitutes legal, tax
or investment advice. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Debentures.
4.6 Purchaser Review. Purchaser hereby represents and warrants
that the Purchaser has carefully examined the Reports, and the financial
statements contained therein. The Purchaser acknowledges that the Company has
made available to the Purchaser all documents and information that it has
requested relating to the Company and has provided answers to all of its
questions concerning the Company and the Debenture. Nothing stated in the
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previous two sentences, however, shall be deemed to affect the representations
and warranties of the Company contained in this Agreement.
4.7 Restrictions on Conversion of Debenture. The Purchaser or
any subsequent holder of the Debenture (the "Holder") shall be prohibited from
converting any portion of the Debenture which would result in the Purchaser or
the Holder being deemed the beneficial owner, in accordance with the provisions
of Rule 13d-3 of the Exchange Act, of 4.99% or more of the then issued and
outstanding Common Stock of the Company.
4.8 Certain Risks. The Purchaser recognizes that the purchase
of the Debentures and the Conversion Shares involves a high degree of risk in
that:
(i) an investment in the Company is highly speculative
and only investors who can afford the loss of their entire investment
should consider investing in the Company and the Debentures and the
underlying securities;
(ii) a purchaser may not be able to liquidate its
investment;
(iii) transferability of the Debentures and Conversion
Shares is extremely limited;
(iv) in the event of disposition, Purchaser could
sustain the loss of its entire investment;
(v) the Debentures represent non-voting securities,
which have the right to convert into and purchase shares of voting
equity securities in a corporate entity;
(vi) no return on investment, whether through
distributions, appreciation, transferability or otherwise, and no
performance by, through or of the Company, has been promised, assured,
represented or warranted by the Company, or by any director, officer,
employee, agent or representative thereof;
(vii) while the Common Stock is presently quoted and
traded on the NASDAQ National Small Cap Market and while the Purchasers
are beneficiaries of certain registration rights provided herein,
(a) the Debentures and the Conversion Shares are not
registered under applicable federal or state securities
laws, and thus may not be sold, conveyed, assigned or
transferred unless registered under such laws or unless an
exemption from registration is available under such laws,
as more fully described below; and
(b) the Debentures are not quoted, traded or listed for
trading or quotation on the NASDAQ National Small Cap
Market, or any other organized market or quotation system,
and there is therefore no present
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public or other market for such Debentures, nor can there
be any assurance that the Common Stock will continue to be
quoted, traded or listed for trading or quotation on the
NASDAQ National Small Cap Market or on any other organized
market or quotation system.
4.9 No Registration, Review or Approval. The Purchaser
acknowledges and understand that the limited private offering and sale of the
Debentures and the Conversion Shares pursuant to this Agreement has not been
reviewed or approved by the SEC or by any state securities commission, authority
or agency, and is not registered under the Act or under the securities or "blue
sky" laws, rules or regulations of any state. The Purchaser acknowledges,
understands and agrees that the Debentures and the Conversion Shares are being
offered and sold hereunder pursuant to (i) a private placement exemption to the
registration provisions of the Act pursuant to Section 3(b) or Section 4(2) of
such Act and Regulation D promulgated under such Act, and (ii) a similar
exemption to the registration provisions of applicable state securities laws.
4.10 No Hedging. The Purchaser shall not, directly or
indirectly, at any time during which the Purchaser holds any Debentures, engage
in any short or other hedging transaction, such as opinion writing, equity swaps
or other types of derivative transaction in the Common Stock or other securities
of the Company or acquire or establish any "put equivalent position" within the
meaning of Rule 16a-1 promulgated under the Exchange Act.
Section 5. Conditions to the Purchaser's Obligation to
Purchase. The Company understands that the Purchaser's obligation to purchase
the Debenture is conditioned upon:
(a) Acceptance by Purchaser of this Debenture Purchase
Agreement for the purchase of the Debenture, as evidenced by the execution of
this Agreement by its authorized officers;
(b) Delivery of the Debentures into Escrow;
(c) Delivery of legal opinion as required by this
Agreement;
(d) Execution and delivery by the Company of the Escrow
Agreement and the Registration Rights Agreement in the form of Exhibits B and C
attached hereto.
Section 6. Conditions to Company's Obligation to Sell.
Purchaser understands that the Company's obligation to sell the Debenture is
conditioned upon:
(a) The receipt and acceptance by the Company of this
Debenture Purchase Agreement for the Debenture as evidenced by execution of this
Debenture Purchase Agreement by the President or any Vice President of the
Purchaser; and
(b) Delivery into escrow by Purchaser of good funds as
payment in full for the purchase of the Debenture.
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(c) Execution and delivery by the Purchaser of the Escrow
Agent and the Registration Rights Agreement in the form of Exhibits B and C.
Section 7. Compliance with the Securities Act.
7.1 Registration Rights Agreement. The parties will enter into
a Registration Rights Agreement, annexed hereto as Exhibit C.
7.2 Underwriter. The Company understands that the Purchaser
disclaims being an "underwriter" (as such term is defined under the Securities
Act and the rules and regulations promulgated thereunder (an "Underwriter"), but
Purchaser being deemed an Underwriter shall not relieve the Company of any
obligation it has hereunder, except as may be required by law.
7.3 Indemnification. Each of the Company and the Purchaser
agrees to indemnify the other and to hold the other harmless from and against
any and all losses, damages, liabilities, costs and expenses (including
reasonable attorneys' fees) which the other may sustain or incur in connection
with any material breach by the indemnifying party of any representation,
warranty or covenant made by it in this Agreement.
7.4 Information Available. So long as any registration
statement is effective covering the resale of the Common Stock underlying the
Debenture, the Company will furnish to Purchaser:
(a) as soon as possible after available (but in the case
of the Company's Annual Report to Stockholders, within 150 days after the end of
each fiscal year of the Company), one copy of (i) its Annual Report to
Stockholders (which Annual report shall contain financial statements audited in
accordance with generally accepted accounting principles in the United States of
America by a national firm of certified public accountants); (ii) each of its
Quarterly Reports to Stockholders, and its Quarterly Reports on Form 10-Q; and
(iii) a full copy of the registration statement covering the Conversion Shares
(the foregoing, in each case, including exhibits); and
(b) upon the reasonable request of Purchaser, such other
information that is generally available to the public.
7.5 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Underlying Shares to the public without registration, the
Company agrees to use its best efforts to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date on which the Company becomes subject to the
reporting requirements of the Securities Act or the Exchange Act;
13
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
(c) to furnish to Purchaser forthwith upon request a
written statement by the Company as to its compliance with the reporting
requirements of said Rule 144, and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as Purchaser may
reasonably request in availing itself of any rule or regulation of the SEC
allowing Purchaser to sell any of the Underlying Shares without registration.
7.6 Temporary Cessation of Offers and Sales by Purchaser. If
at any time or from time to time after the Registration Effective Date, the
Company notifies the Purchasers in writing of the existence of a Potential
Material Event, the Purchasers shall not offer or sell any Conversion Shares or
engage in any other transaction involving or relating to the Registrable Shares,
from the time of the giving of notice with respect to a Potential Material Event
until such Purchasers receive written notice from the Company that such
Potential Material Event either has been disclosed to the public or no longer
constitutes a Potential Material Event; provided, however, that the Company may
not so suspend the right to such holders of Conversion Shares for more than two
twenty (20) day periods in the aggregate during any 12-month period with at
least a ten (10) business day interval between such periods, during the periods
the Registration Statement is required to be in effect.
7.7 Transfer of Common Stock After Registration. Purchaser
hereby covenants with the Company not to make any sale of the Common Stock
except either (i) in accordance with the Registration Statement, in which case
Purchaser covenants to comply with the requirement of delivering a current
prospectus, or (ii) in accordance with Rule 144, in which case Purchaser
covenants to comply with Rule 144.
7.8 Termination of Obligations. The obligations of the Company
pursuant to the Registration Rights Agreement shall cease and terminate upon the
earlier to occur of (i) such time as all of the Common Stock have been re-sold,
or (ii) such time as all of the Common Stock may be re-sold in any three-month
period pursuant to Rule 144 under the Securities Act.
7.9 Legend. The certificate or certificates representing the
Debentures and, upon conversion, the Conversion Shares shall be subject to a
legend restricting transfer under the Securities Act of 1933, such legend to be
substantially as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS, OR IN A
TRANSACTION WHICH IS
14
EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND
UNDER PROVISIONS OF APPLICABLE STATE SECURITIES LAWS; AND IN THE CASE
OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE SECURITIES,
WHICH OPINION AND WHICH COUNSEL SHALL BE SATISFACTORY TO THE COMPANY IN
ITS SOLE DISCRETION."
Such securities shall also include any legends required by any applicable state
securities laws.
With respect to the Conversion Shares, the legend(s) shall be
removed and the Company shall issue a replacement certificate without such
legend to the holder of such certificate if such holder provides to the Company
an opinion of counsel reasonably acceptable to the Company, to the effect that a
public sale, transfer or assignment of such stock may be made without
registration.
Section 8. Legal Fees and Expenses. Except as provided in the
Escrow Agreement, each of the parties shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others engaged
by such party) in connection with this Agreement and the transactions
contemplated hereby.
Section 9. Notice of Conversion. Conversion of the Debenture
to Common Stock may be exercised in whole or in part by Purchasers telecopying
an executed and completed Notice of Conversion (in the form annexed hereto as
Exhibit D) to the Company and delivering the original Notice of Conversion and
the certificate representing the Debenture to the Company by express courier
within three (3) business days of exercise. Each date on which a Notice of
Conversion is telecopied to the Company in accordance with the provisions hereof
shall be deemed a Conversion Date. The Company will transmit the certificates
representing the Common Stock issuable upon conversion of all or any part of the
Debenture (together with the certificates representing portions of the Debenture
not so converted) to the Purchaser via express courier within five (5) business
days after the Company has received the original Notice of Conversion and
Debenture certificate being so converted. In addition to any other remedies
which may be available to the Purchaser, in the event that the Company fails for
any reason to effect delivery of such shares of Common Stock within such five
(5) business day period, the Purchaser will be entitled to revoke the relevant
Notice of Conversion by delivering by telecopier with an original by overnight
courier a notice to such effect to the Company whereupon the Company and the
Purchaser shall each be restored to their respective positions immediately prior
to the delivery of the Notice of Conversion. Upon receipt of such Notice the
Company shall return by overnight courier the original certificate representing
the Debenture. The Notice of Conversion and certificate representing the portion
of the Debenture converted shall be delivered as follows:
15
To the Company:
HomeCom Communications, Inc.
Xxxxxxxx 00, Xxxxx 000
0000 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxx, President/CEO
(tele) (000) 000-0000
(fax) (000) 000-0000
or to such other person at such other place as the Company shall designate to
the Purchaser in writing.
In the event that the Common Stock issuable upon conversion of
the Debenture is not delivered within five (5) business days of receipt by the
Company of a valid Conversion Notice and the Debenture to be converted (such
date of receipt referred to as the "Conversion Date"), the Company shall pay to
the Purchaser, by wire transfer, as liquidated damages for such failure and not
as a penalty, for each $100,000 of Debenture sought to be converted, $500 for
each of the first ten (10) days, and $1,000 per day thereafter that the
Conversion Shares are not delivered, which penalty shall run from the sixth
business day after the Conversion Date.
Section 10. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, and shall be deemed given when
so mailed:
(a) if to the Company, to
HomeCom Communications, Inc.
Xxxxxxxx 00, Xxxxx 000
0000 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxx, President/CEO
(tele) (000) 000-0000
(fax) (000) 000-0000
copy to:
Xxxxxx, Xxxxxxx & Xxxxxx, LLP
1600 Atlanta Financial Center
0000 Xxxxxxxxx Xxxx, XX
Xxxxxxx, XX 00000
Attn: Xxx X. Xxxxxx, III
(tele) (000) 000-0000
(fax) ( 000) 000-0000
16
or to such other person at such other place as the Company shall designate to
the Purchaser in writing;
(b) if to the Purchaser, to
(tele)
(fax)
copy to:
(tele)
(fax)
or at such other address or addresses as may have been furnished to the Company
in writing; or
(c) if to any transferee or transferees of a Purchaser, at
such address or addresses as shall have been furnished to the Company at the
time of the transfer or transfers, or at such other address or addresses as may
have been furnished by such transferee or transferees to the Company in writing.
Section 11. Miscellaneous.
11.1 Entire Agreement. This Agreement, including all Exhibits
and Schedules hereto, embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings relating to the subject
matter hereof. No statement, representation, warranty, covenant or agreement or
any kind not expressly set forth in this Agreement shall affect, or be used to
interpret, change or restrict, the express terms and provisions of this
Agreement.
11.2 Amendments. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and by
Purchaser.
11.3 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
17
11.4 Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
11.5 Governing Law/Jurisdiction. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of New York, except for matters arising under the 1933 Act, without reference to
principles of conflicts of law. Each of the parties consents to the jurisdiction
of the federal district court for the Southern District of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. Each party hereby agrees that if either party to this Agreement
obtains a judgment against it in such a proceeding, the party which obtained
such judgment may enforce same by summary judgment in the courts of any country
having jurisdiction over the party against whom such judgment was obtained, and
each party hereby waives any defenses available to it under local law and agrees
to the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law.
11.6 Recovery of Attorney's Fees. Should any party bring an
action to enforce the terms of this Agreement then, if Purchaser prevails in
such action it should be entitled to recovery of its attorney's fees from the
Company, and if the Company prevails in such action it shall be entitled to
recovery of its attorney's fees from the Purchasers.
11.7 Fees. The Company acknowledges that Purchaser shall have
no responsibility for the payment of any of its fees in connection with this
offering.
11.8 Counterparts/Facsimile. This Agreement may be executed
in two or more counterparts, each of which shall constitute an original, but
all of which, when taken together, shall constitute but one instrument, and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to the other party. In lieu of the original, a
facsimile transmission or copy of the original shall be as effective and
enforceable as the original.
11.9 Publicity. The Purchaser shall not issue any press
releases or otherwise make any public statement with respect to the transactions
contemplated by this Agreement without the prior written consent of the Company,
except as may be required by applicable law or regulation.
11.10 Survival. The representations and warranties in this
Agreement shall survive Closing.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives the day and year
first above written.
HOMECOM COMMUNICATIONS, INC.
By /s/ Xxxxxx Xxx
---------------------------------
Xxxxxx Xxx, Chief Executive Officer
Attest:
/s/ Xxxxxx Xxxxx
-------------------------
Xxxxxx Xxxxx
Chief Financial Officer
PURCHASER:
-------------------------
By
-----------------------
Officer
